TaxTMI 
TaxTMI 
2018 (4) TMI 1293
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....r of Fragrances & Flavours, and not to earn surplus and that the resulting surplus is only incidental. 3. The Learned Commissioner of Income-tax (Appeals) erred in not appreciating that the main purpose for introduction of a proviso to section 2(15) was to cover only those organizations which are essentially trading organisations but are camouflaged as charitable one; and whereas objects of the appellant trust being charitable is well established. 4. The Learned Commissioner of Income tax (Appeals) erred in holding that ther is no strong proof available with the appellant that it had ever contributed in the area of research work which would benefit the entire nation as claimed by the appellant. 5. The Learned Commissioner of Income tax (Appeals) erred in holding that the surplus from Bangalore seminar to the tune of Rs. 83.77 lakhs as against the deficit of Rs. 1.36 lacs from journal activity proves that the appellant has been behaving in the style of a prudent businessman only. 6. The Learned Commissioner of Income tax (Appeals) erred in placing undue emphasis on a single seminar, without considering the entire activities of the association in a holistic manner. 7. ....
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....s under: S.No. Activity as per accounts Receipts from this activity (Rs.) Observation of the A.O about the nature of activity 1 Subscription received 12,11,250.00 Commercial in nature 2 Sale of publications 11,000.00 Commercial in nature 3 Fafai journal (-) 1,36,934.60 Commercial in nature 4 Workshop & conference 52,208.00 Commercial in nature 5 Bangalore Seminar 83,77,520.68 Commercial in nature 6 Directory receipts 29,976.25 Commercial in nature 4. The A.O observed that Sec. 2(15) was amended vide the Finance Act, 2008 by adding a proviso, which provided that w.e.f 01.04.2009 the "advancement of any other objects of public utility" shall not be a charitable purpose, if the same involved the carrying of : (a). any activity in the nature of trade, commerce or business; or (b). any activity of rendering any service in relation to trade, commerce or business; ,for a cess or fee or any other consideration exceeding the amount contemplated therein, irrespective of the nature of use or application or retention of the income from such activity. Still further, the A.O observed that as per Sec. 13(8) mad....
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....cial activities, viz. (i). Subscription received; (ii). Sale of publications ; (iii). Fafai Journal ; (iv). Workshop & Conference; (v). Bangalore Seminar; and (vi) Directory receipts, therein demonstrated before the A.O that all of the said respective activities were for the furtherance of the general public utility object of the assessee and could by no means be construed as commercial activities. However, the explanation of the assessee did not find favour with the A.O. The A.O by taking cognizance of the fact that the assessee had collected sponsorship fees of Rs. 83,77,520.68 by allowing members of the industry to display their products at the seminar held at Bangalore, thus, held a conviction that the aforesaid services provided by the assessee were clearly in the nature of commercial activities within the meaning of Sec. 2(15). The A.O on the basis of his aforesaid observations concluded that as the assessee was clearly carrying on commercial activities, therefore, it was not entitled for claim of exemption under Sec. 11 of the Act. The A.O while declining the claim of exemption raised by the assessee under Sec. 11, was also not persuaded to accept the contention of the asses....
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....onal seminar at Bangalore for the purpose of furtherance of the objects of the assessee trust and benefit of the Fragrance and flavours industry could not be characterised as a commercial activity. The ld. A.R further submitted that the assessee trust had during the year under consideration carried out research activities in furtherance of its objects. The ld. A.R in the backdrop of his aforesaid submissions averred that both the lower authorities loosing sight of the fact that the activities of the assessee trust were not in the nature of commercial activities, but rather, were in the furtherance of its objects, had thus misconceived the factual position and declined the entitlement of the assessee towards claim of exemption under Sec. 11. The ld. A.R submitted that where a mutual association was formed for the purpose of the general benefit of its members, then in the absence of any motive of private profit the same would duly be entitled for claim of exemption under Sec. 11. The Ld. A.R in support of his aforesaid contention relied on the judgment of the Hon'ble High Court of Delhi in the case of Chamber of Commerce & Industry Vs. Director of Income Tax (Exemptions) (2014) 265 I....
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.... on of any activity in the nature of trade, commerce or business OR any other activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application or retention of the income from such activity. 9. We have given a thoughtful consideration to the issue before us. We find that the assessee is registered as a Charitable organization under Sec. 12A with the Director of Income-tax (Exemption), Mumbai. That as the activities of the assessee were primarily in the nature of "advancement of any other object of general public utility", therefore, the A.O being of the view that as per the post amended definition of the term 'Charitable purpose' in Sec. 2(15) the commercial activities of the assessee could no more be held as being for charitable purpose, as a result whereof the assessee stood disentitled for claim of exemption under Sec. 11 of the Act. We find that the assessee had declined that it was carrying on any commercial activities and had rather by referring to its activities which had been taken cognizance of by the A.O, viz. (i). Subscription received; (ii). Sale of publicatio....
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....he assessee was involved in carrying on of commercial activities within the meaning of Sec. 2(15), was primarily guided by the fact that the products of the sponsors from whom sponsorship fees were received by the assessee were displayed at the seminar held at Bangalore. We are of the considered view that the holding of the seminar at Bangalore was in furtherance of the main object of the assessee trust of empowerment, betterment and creating awareness amongst the industrialists in order to bring about the development of the Fragrance and Flavours industry in India. We further find that the assessee was not by way of a regular and systematic activity carrying on such seminars, and as observed by us hereinabove, the seminar at Bangalore was the only international seminar held by the assessee trust. We are further of the considered view that no such inextricable nexus between the receipt of sponsor fees by the assessee and display of the products of the sponsors does emerge, on the basis of which the same could safely be characterised as a commercial activity. 11. We are of the considered view that the fact that holding of the seminar at Bangalore by the assessee was in furtherance ....
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....t of the assessee trust, viz. providing knowledge, information, awareness, demonstrations etc. to the members of the Fragrance and Flavours industry, therefore, neither the carrying on of either of the aforesaid activities, specifically the display of the products of the sponsor members of the industry in the course of the seminar at Bangalore, which we find had been emphasized by the revenue as the primary reason for concluding that the assessee was carrying on commercial activities could be held as such and brought within the sweep of the first proviso of Sec. 2(15). We further find that the Hon'ble High Court of Madras in the case of Director of Income Tax (Exemption) Vs. The Chartered Accontant Study Circle (2012) 250 CTR 70 (Mad), had the occasion to deliberate on the scope and gamut of the first proviso of Sec. 2(15) in the case of an asseseee trust whose objects among other things was to conduct periodical meetings on professional subjects. The High Court observed that the publishing and sale of books, booklets etc. on professional subjects related to audit and not on any other subject by the assessee. The sale of the books was primarily made to the members of the society, a....
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....inant object of maintaining and upholding the standards of the accountancy profession and in furtherance of the object and purpose for which the institute was established, i.e., professional excellence and promotion of accountancy as a preferred profession, and to sharpen the skills and knowledge of the members of Institute who would attend the courses/lectures etc., therefore, the activities of providing coaching classes or undertaking campus placement interviews for a fee were in relation to the main object of the assessee institute, which could not be held to be trade, business or commerce. The High Court while concluding as hereinabove, had observed as under: "After going through the provisions of the ICAI Act and the Regulations framed therein as well as various activities carried on by the petitioner, we are of the view that the petitioner institute does not carry on any business, trade or commerce. The activity of imparting education in the field of accountancy and conducting courses both at pre-qualification as well as post-qualification level are activities in furtherance of the objects for which the petitioner has been constituted. Activities of providing coaching class....